ACC – attack then privatise!

If Nick Smith thought he would frame himself as the strong, decisive Accident Compensation Corporation Minister when he gatecrashed a parliamentary select committee last week he failed. Instead he looked like a pompous prat.

Smith’s escapade in standing in for his new Board Chair appointee John Judge and taking questions meant for the ACC Chief executive Dr White was a sexist, boorish display of spoiled-brat behaviour.

His appearance was part of a concerted National party push these past two weeks to convince us ACC is in a financial mess, its board incompetent and unless drastic steps are taken it will become a basket case.

Smith has claimed ACC’s liabilities – the amount needed to cover future costs of all existing claims – will stand at $21.8 billion by the middle of this year. This is like saying we have a $100 billion liability in our schools because we will have to fund teachers’ salaries for the next 20 years. Give us a break Nick!

The problem behind ACC rests with the financial crisis and the fact the corporation’s balance sheet has been hit hard by the past year’s stockmarket slide. If Smith complains about anything it should be the lunacy of successive governments relying on markets to provide income for essential services such as ACC payments or retirement income. The Cullen superannuation fund, which invests to subsidise future national superannuation payments, and private Kiwisaver investments are caught in the same market trap.

National’s real goal is to manufacture a crisis to soften us up for privatisation of various ACC accounts. National did this in the late 1990s and is desperate to do it again. So Smith went on the attack against the ACC board while ordering the board not to make media comment to defend itself. He wanted a clear space to attack without retaliation. He wanted the board’s hands tied before he got into the ring to give it a pounding.

More rational comments have been overlooked in Smith’s attacks on the corporation. A review by Price Waterhouse Coopers last year praised the corporation. Among other things it said our ACC provides broader coverage than any other scheme in the world; it returned 88% of people back to work within six months (compared to 85% in Australia); the cost to employers was lower than comparable private schemes overseas and its administration costs were lower. Management expenses were at 8% while Australian schemes ranged from 9% to 32%. And on it goes. In every significant aspect it is performing better than any similar scheme, public or private, overseas.

There is understandably significant reluctance among employers to privatise the scheme. Instead ideologues in the Business Roundtable, ACT and the National Party are those driving privatisation.

This is no bloated bureaucracy as National would like us to believe. It is efficient and able to easily expand its services to New Zealanders. In fact last year the corporation collected $3.6 billion from levies while the cost of claims was just $2.7 billion. The corporation was therefore able to build up its reserves. If ACC was privatised we all know that $0.9 billion would have been available as private sector profit.

Nick Smith’s claims of a crisis at ACC will be used to open up to competition some of ACC’s accounts. These will be the accounts where the private sector can be assured of making a profit while the corporation is left with accounts carrying heavier liabilities. This was the pattern followed with privatisations and part-privatisations in the 1980s and 1990s. The profits were privatised and the losses left to the taxpayer.

Nick Smith’s antics reflect a National Party having spent nine years in opposition and raring to get stuck in to the public sector. However they have been hobbled by their assurance they would not sell state assets in their first term in government.

So without the chance to enjoy the deep water of major policy change National ministers are thrashing around in the shallows.

In the next few weeks we will see State-Owned Enterprises Minister Simon Power beat his chest and talk tough to the heads of state-owned corporations. Power has summoned the heads of SOEs to a meeting in the Finance Minister’s office on April 9th to tell them he wants better financial performance. Power hasn’t asked them to improve their level of service or reduce their prices to the public in tough economic times. Instead he wants higher financial returns to the government to help replace the revenue lost when tax cuts come in on April 1st.

Cynics will also say (and count me among them) he wants to trim them into efficient money-making organisations so they can be readily privatised after the next election.

In the meantime the antics of Smith and Power reflect the frustrations of Ministers required to run services for the public rather than turn them over for private profit.